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kirkydu (93.93)

I Think I Have a Man-Crush on Paul Krugman

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February 08, 2010 – Comments (24) | RELATED TICKERS: QQQ , GE , JPM

While I am at heart an Austrian economist, both by blood and book, I can't help but completely agree with Paul Krugman regarding current economic and political times.  If the gov'ment does not spend to stabilize the economy and also to create jobs, then the ship is lost.  Pols, pundits and bloggers who lambast federal deficits right now are idiots, very unworthy of being called fools.

Here's Krugman's recent take: http://www.nytimes.com/2010/02/05/opinion/05krugman.html?em

It's right on the money.  Pols, and their adopted media, are playing politics with current deficit issues.  Without the current deficit running by gov'ment, there would be soup lines.

Here's where I agree with Krugman even more.  The gov'ment ought to spend another truck load on money to rebuild the energy (heavily on nuclear, wind and solar to alleviate foreign dependence), water and transportation (grid, electric cars and nat gas trucks) infrastructures to stimulate skilled jobs, which in trun will create more jobs when the skilled start to spend.  Here's a description of what happens when the gov'ment does that type of spending: http://www.youtube.com/watch?v=gm98PceJhSg&feature=related

In any case, maybe it is his stunning good looks, but maybe it is just that what he is saying makes sense right now.  Krugman also appears to be right that if we use political motivation and mathematical ignorance to fight gov'ment from preventing a deeper slide, well, then the United States will be lost (http://www.nytimes.com/2010/02/08/opinion/08krugman.html?ref=opinion).

People need to realize that although borrowing for the sake of consumption is a problem, borrowing for the sake of production, on the right terms, makes a ton of sense.  Ask any successful business man who had to leverage up early while building a company.

24 Comments – Post Your Own

#1) On February 08, 2010 at 11:40 AM, whereaminow (25.00) wrote:

Really?  An Austrian that isn't familiar with Henry Hazlitt, huh?

What would he say about Krugman's plans? 

I'm glad you are interested in the Austrian school.  Allow me to point out that Krugman's plan is the bridge being built, while the transfer of funds is the unseen.  

Government just moves money around.  It's not investment.  Don't fall prey to Krugman's caring tone.  He's a shill, a hack, and a terrible economist (see his post 9/11 broken window fallacy, his strawman attacks on Austrian Business Cycle Theory, and his call for a housing bubble to replace the dot com bubble in 2002.)

I liken him to a senior Witch Doctor.  His methods are crude (aggregates) and completely ineffective (he can predict nothing and solve nothing), yet among the economically ignorant he offers a compelling case.

David in Qatar

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#2) On February 08, 2010 at 12:17 PM, kirkydu (93.93) wrote:

I've read you before David, I find it ironic you would call someone "a shill, a hack, and a terrible economist."  Interesting that somebody claiming to be in Qatar wouldn't want to see a bigger U.S. commitment to alternative energies. 

Whether by spending or backing loans, and likely both, the U.S. needs stop exporting money for energy and jobs in general.  Infrastructure is the (only) way to do that given economies have been manipulated for so long. 

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#3) On February 08, 2010 at 12:41 PM, whereaminow (25.00) wrote:

kirkydu,

Actually, I'm chilling in Kochi, India right now.  Either way, I'm not sure what my residence in Qatar has to do with alternative energies. 

Are you upset or something?  You claimed to be an Austrian.  I pointed you to Austrian School thought that runs counter to your opinion.  No reason to be mad at me.

But, thanks for reading my posts.

David in Qatar, er.... India

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#4) On February 08, 2010 at 1:02 PM, davejh23 (< 20) wrote:

"Without the current deficit running by gov'ment, there would be soup lines."

Nearly 40 million Americans are currently dependent on food-stamps.  Is this really any different than soup lines?  Unemployment extensions are also being funded by deficit spending as a majority of states' funds have run dry.  So, did the deficit spending solve a problem, or is it just masking the problem?

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#5) On February 08, 2010 at 1:23 PM, XMFSinchiruna (27.58) wrote:

Krugman is so far off base, I could tag him out without leaving my chair.

Incidentally, he reminds me of actor Paul Gianotti. When they make the blockbuster movie portraying the folly of misguided Keynesians, at least we already have Krugman's role well cast. :P

"Pols, pundits and bloggers who lambast federal deficits right now are idiots, very unworthy of being called fools."

That's pretty harsh, kirkydu, especially from one claiming to know what is worthy of being called Foolish ... any particular reason you find it necessary to insult anyone with another perspective? Could it be that it's faster than building a cogent argument to support your case?

History will not judge Krugman kindly:

"Peter Schiff, Jim Rogers, Niall Fergusson, Ann Pettifor ... these are the voices that I believe investors need to hear. Turn off the tv and look deep into the events of last year and consider for yourselves whether anything more than a hail-mary reflationary maelstrom has been heaped upon the fire that started it all. For those who see Krugman's nonsense or Kudlow's cheerleading as anything other than the useless distractions that I believe they are, I will remain concerned for your financial well-being, as you may very well remain concerned for mine. :)"

 

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#6) On February 08, 2010 at 1:26 PM, davejh23 (< 20) wrote:

"I liken him to a senior Witch Doctor.  His methods are crude (aggregates) and completely ineffective (he can predict nothing and solve nothing)..."

Who knows if he even believes what he's saying?  Maybe he's expecting a crash whether we decrease deficit spending or not.  He's not just defending deficit spending, he's proposing that we spend much more...no matter what happens, he'll claim that he was correct...he's pushing his own political agenda as much as anyone.

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#7) On February 08, 2010 at 1:28 PM, kdakota630 (29.76) wrote:

Did you mean Paul Giamatti?

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#8) On February 08, 2010 at 1:39 PM, StKitt (29.97) wrote:

I thought the Austrian School considers bread lines and soup kitchens a good thing.... just as long as you're not the one in need. The only economy which matters is one's own, right?

There is no such thing as a unifying theory of economics because there are just too many variables.

Enjoy the ride!

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#9) On February 08, 2010 at 1:43 PM, russiangambit (29.37) wrote:

Senior Witch Docotor, yeah.

Krugman is very smart and his analysis is usally very good and clear. Where the problem usually comes at the point where he proposes solutions. He has an aganda, cleary and so he arranges the analysis iand solution in such a way that they support his agenda. He is very good at it. It doesn't diminish, at least for me the value of his analysis.

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#10) On February 08, 2010 at 1:48 PM, YesButHowever (< 20) wrote:

Krugman is a hypocrite:

 

http://yesbuthowever.com/paul-krugman-hypocrite-8136537/

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#11) On February 08, 2010 at 1:55 PM, topsecret10 (< 20) wrote:

While I am at heart an Austrian economist, both by blood and book, I can't help but completely agree with Paul Krugman regarding current economic and political times. If the gov'ment does not spend to stabilize the economy and also to create jobs, then the ship is lost. Pols, pundits and bloggers who lambast federal deficits right now are idiots, very unworthy of being called fools.   Kirk.....   The Federal Government CANNOT spend our way out of a depression. Yes,I said depression .....   Our government has been on a spending spree for over two decades,AND YOU CAN SEE WHERE THAT HAS TAKEN US, to the edge of the abyss....   Our governments out of control spending,combined with "free trade agreements" that have been anything but FREE,have only made our economic situation considerably worse over the years.   TS

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#12) On February 08, 2010 at 2:00 PM, russiangambit (29.37) wrote:

Further, On Krugman's points:

1. more spending is required to pull us out of the recession - agree, but it is not going to happen because at this rate US will go bankrupt in a couple of years before the economy is restarted. Plus if spending could truly restart the economy we would've been in  recovery now. First we need to have a plan as to how to restart the economy and then spend and we are doing it backwards and wasting money.

2. Voting for republicans is voting for gridlock - I think it doesn't matter republican or democrat. Washington has been in gridlock for a better part of last 30 years. Krugman's solution is one party system. Instead the solution should be milti-party system with more direct accountability to the voters. We should a country-wide tracking system for what politicans promise when campaining, details on how they paln to fulfill the promise and then what they do once elected. And no lobbying by corporations or groups.

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#13) On February 08, 2010 at 2:07 PM, Wh1sp (99.99) wrote:

I love the notion that energy independence is so vital. I find the idea simply lacking in substance. If the middle east cut off the U.S. completely, we would be relatively unaffected, unless all suppliers of oil collaborated together to boycott the U.S. (at their own expense). Cheap oil means high margin oil, not lower priced oil for the end consumer.

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#14) On February 08, 2010 at 4:17 PM, kirkydu (93.93) wrote:

Wow, I come back and see a shit storm I have seeded.  Nice.

First, TMFSinchiruna, I am qualified to judge fooldom for all the reasons you are, I suppose, maybe more, I actually manage a lot of money and own three biz.  Are you a writer?  In any case, I just shot back with equal vitriolic vigor as was shot, I always find it fun when a semi-offended response comes back.

Second, while bizness cycles, unfettered in theory could regulate themeselves if there were no cheaters, we clearly know there are cheaters, therefore regulation and gov'ment have a role.  StKitt said it best, there is no unifying economic theory, only the lessons we take from each line of thought and how we apply it to today's situation.

Third, government spending did not cause our collapse, not by a long shot.  Unregulated abuse of the mortgage and mortgage securities markets, and loose money during a supposed expansion caused the crash.  Lack of gov'ment oversight and a bad monetary policy caused the crash.  That's not a reason to abandon trying.  Though I would agree, the next time things rebound, can we stop deliberately interferring with rational and just focus on keeping the cheaters at bay.

Anyway, the result of Gramm-Leach-Bliley Act in 1999, the President's Home Ownership Challange in 2002, Greenspan's money creation 2000-2004, federal pre-emption by the OCC of state anti-predatory lending laws 2002-2004, cutting the FBI's white collar crime budget by 30% from 2002-2004 despite warnings from the FBI there was a mortgage crime crisis,  the lifting of the leverage rule for Merrill, Lehman, Goldman, Morgan and Bear from 12:1 to whatever, was a financial hole, the size of Texas and Alaska and Iceland and Greece and Ireland... 

To get out of such a financial hole we could just allow things to grow back cyclically, though that would take a very long time, probably a generation.  Gov'ment spends when we have such holes.  Only because the hole is so deep this time, do we have to spend so much.  Now, I do agree that just throwing money at people makes little sense.  The borrowing must be towards productive ends that move money back into the private sector ultimately with some velocity.  Today, that means energy (preferrably nukes, wind and solar), transportation (roads, bridges, infrastructure for electric cars and nat gas trucks) and water resources infrastructure. 

To think there is any way other than gov'ment backing of spending or outright spending boggles the brain.  Drop the ideological gobbledeegook.  Bizness goes into debt all the time to beget more bizness.  I'm not talking about the gov'ment running things, I'm talking about the gov'ment directing and backing some very necessary work, ala the 1950s (the greatest economic decade EVER), so we get jobs, money velocity and some big f'ing things we need. 

Yeah, we could do across the board tax breaks, and I like breaks on small biz, but we need some big things done, i.e. nuke plants, roads, pipelines, water reclamation plants...   That stuff doesn't pop up because of a better depreciation schedule.

I guess if you don't believe we need the stuff I mention desperately, then I can presume you don't live in the United States. 

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#15) On February 08, 2010 at 4:21 PM, kirkydu (93.93) wrote:

Oh, btw, Wh1sp, didn't OPEC give us a little grief in the 1970s?  That was a problem wasn't it, or am I misunderstandimating? 

Moving toward energy independence is not only important to the economy, it is important from a security standpoint.  We will not be allowed to consume as much as we have as China and India come more online. 

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#16) On February 08, 2010 at 4:57 PM, XMFSinchiruna (27.58) wrote:

kirkydu

"TMFSinchiruna, I am qualified to judge fooldom for all the reasons you are, I suppose, maybe more, I actually manage a lot of money and own three biz.  Are you a writer?"

well... aren't we pleased with ourselves? :)

I'm glad you don't manage my money.

kdakota630

Thanks for the spell check ... yes, him ... but more the way he looked in that bad napa Valley movie Sideways. 

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#17) On February 08, 2010 at 5:06 PM, XMFSinchiruna (27.58) wrote:

The final destination of this spending strategy is a fiscal nightmare via terminal currency debasement. As horrid a fate as unchecked deleveraging represents, the unforeseen consequences of government intervention through quantitative easing are orders of magnitude worse.

These are not the fifties ... it's more like 1932. I just don't see this hail mary pass being caught downfield.

Yes, business borrow to beget business, but those leveraging up during a deleveraging event are advised to be aware of risks involved.

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#18) On February 08, 2010 at 5:08 PM, kirkydu (93.93) wrote:

Well Sinch, if you really don't want me managing your money, then I guess you have somebody else who pretty consistently rates in the top 5-10% money managers (v the Schwab universe of SMA managers).  Good for you.  I'm just some rube from fly over country with a good midwestern heart and the sense to know better when somebody's theory flies in the face of reality.

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#19) On February 08, 2010 at 5:11 PM, kirkydu (93.93) wrote:

Sinch, now that I reflect a minute, you're probably more glad I'm not the President.  Then again, maybe you'd like that I probably wouldn't care about re-election and would just throw 49 Congressmen under the bus and pass as much on reconcilation 5 year deals as I could. 

And who are you kidding, you'd love it if I invested your money.  Oh the fun we would have. 

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#20) On February 08, 2010 at 5:19 PM, kirkydu (93.93) wrote:

"those leveraging up during a deleveraging event are advised to be aware of risks involved."

NO NO NO, that is completely backwards.  When everybody else is borrowing, you should hold cash and wait for the creidt bubble to burst.  When everybody else is not borrowing, you should borrow to the hilt because you are getting the rare opportunity to buy low and with low rates.  That's biz 101.

If the U.S. which will have refinanced like 85%+ of its debt from 2007-2011 doesn't have to refi much for a decade, that buys us a decade (or more, I'd have to look at the durations of gov'ment bonds) or more to grow out, with the eventual aid of inflation which makes our bonds already in existence cheaper to pay off. 

Friend, we are refinancing the nation at today's rates and will benefit so long as our international cost- energy- is fixed domestically within that decade or so, hence, why I keep pointing to energy policy as the bugaboo.  If we fix that, by borrowing today, it is the greatest financial move ever.  If we don't, well then, glad I've been buying farm land (actually I'm glad about that either way, I like growing stuff).

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#21) On February 08, 2010 at 6:57 PM, XMFSinchiruna (27.58) wrote:

kirkydu

Well ...you're heart appears to be in the right place. Clearly, we both love our country very much ... we just have different notions of how to fix it ... perhaps even what is ailing it.

Fool on.

 

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#22) On February 09, 2010 at 3:36 AM, whereaminow (25.00) wrote:

This is the classic Free Rider argument.  According to Interventionists (you can lump most academic economists, conservatives, and liberals in this category), the government has to step in to support investment in certain sectors because the "public" won't support them. 

It's a total fallacy.  There is, and has never been, a Free Rider problem.  And once you realize that it is a fallacy (see How Capitalism Saved America for a survey of the Free Rider problem in American history), then you come to understand that the only reason that the market has not provided services that people want is because the government is in the way, preventing it.

So asking the government and the vested interests to provide you with a service based on an economic fallacy is about as pointless as it gets.  This is why Krugman is a horrible economist.  His policy recommendation is more theft to fix the problem of too much theft; more debt to fix the problem of too much debt; more mercantilism to fix the problem of too much mercantilism.

It's laughable.

David in Qatar

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#23) On February 09, 2010 at 9:52 AM, ElCid16 (95.52) wrote:

Kirk said: 

"Here's where I agree with Krugman even more.  The gov'ment ought to spend another truck load on money to rebuild the energy (heavily on nuclear, wind and solar to alleviate foreign dependence), water and transportation (grid, electric cars and nat gas trucks) infrastructures to stimulate skilled jobs, which in trun will create more jobs when the skilled start to spend."

"People need to realize that although borrowing for the sake of consumption is a problem, borrowing for the sake of production, on the right terms, makes a ton of sense."

"Now, I do agree that just throwing money at people makes little sense.  The borrowing must be towards productive ends that move money back into the private sector ultimately with some velocity.  Today, that means energy (preferrably nukes, wind and solar), transportation (roads, bridges, infrastructure for electric cars and nat gas trucks) and water resources infrastructure."

My response: 

I agree that government spending on infrastructure provides great long term benefits, especially when this goverment spending is increased during recessionary periods.  However, spending right now is not being allocated efficiently, like what you and Krugman are speaking of.  You talk about the importance of spending on bridges, roads, energy efficiency, etc.  Go to this link

http://query.nytimes.com/search/query?ppds=des&v1=OBAMA+STIMULUS+PLAN&fdq=19960101&td=sysdate&sort=newest&ac=OBAMA+STIMULUS+PLAN&rt=1%2Cdes%2Corg%2Cper%2Cgeo

and click on "The Stimulus Plan:  How to Spend $787B" and see where the money is going.  Its all short-term, bandaid fixes, not long-term investment.

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#24) On February 09, 2010 at 10:27 AM, kirkydu (93.93) wrote:

dkilgour16

Oh, don't get me wrong, I know the money has been largely bandaid driven so far, heck I wrote this in a letter to clients last January:

Caring for the economy in the short run, until international and then domestic growth reignites, requires that we pour money onto it.  While I won’t argue that the money that is being poured today is being poured one hundred percent correctly, I can argue that pouring money on the economy is as necessary as the water that people trying to save the whale on the beach pour on it.

You will have heard reference to systemic risks to the economy if the Federal Reserve and U.S. Treasury do not pump money into the system.  They are right from everything I can surmise.  There is a gigantic risk of massive unemployment and financial collapse if we do not pour money on top of the economy.  I certainly understand people’s suspicion that bailing out AIG or GM or Citigroup or whoever, is throwing good money after bad.  Some of the money is being wasted and stolen, there is no doubt.

===================== 

Prior to that excerpt in the letter I said this, and stand by it as above reflects:

...Because of this unvirtuous circle, we are in the middle of a serious contraction.  Right now, because such a deep hole was dug with borrowed and often times imaginary money, the government is trying to fill that hole by printing money and buying defective debt off the market.  These actions spread the risk to the entire population, and while probably somewhat necessary to avoid further collapse, will come with a large price down the road. 

Hopefully, although I doubt it, the economy can grow fast enough in the future where the return on the borrowing we are doing is worthwhile.  Simplistically, we will at some point in the next decade need to have growth rates that exceed the interest rate on our debt, at least over 4% to 5%, which would be a super-boom in such a developed economy.  The only thing I can think of that will provide such growth will be a massive restructuring and rebuilding of our energy, transportation and utility infrastructure to take advantage of alternative energy, improved concepts in transportation, water resource preservation and environmental concerns. There will be many entrenched interests that will need to be overcome and appeased to do this.  I hope we have the strength and foresight to move forward.

===================

Hey David in someplace,

Build me a nuclear power plant.  I'll pay for it, I promise.

You've been hoodwinked my friend.  You discount dishonesty as naturably regulated by the market and the need of a broader buyer (gov'ment) as necessary for public works.  Heck, a Republican President, Ike, proved you wrong and sounded a warning I don't believe (though I could be wrong) you hear.

Here, listen to this and read his books: http://www.youtube.com/watch?v=VL8ZyLLP8GA

 

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